Transcript: Understanding The New HHS ACO Rule

KHN’s Jordan Rau explains how the Obama administration envisions accountable care organizations, which are designed to help hospitals and doctors form new networks to coordinate patients’ care. Officials estimate that the ACOs could save Medicare up to $960 million over three years. ACOs are a feature of the new health law.

JACKIE JUDD: Good day, I’m Jackie Judd. The much-anticipated regulations governing the creation and operation of ACOs, accountable care organizations that would serve Medicare patients, have been released by the Department of Health and Human Services. This is a draft that will be finalized after the public and the interested parties weigh in.

Jordan Rau, correspondent for Kaiser Health News, is here to decipher this for us. Almost 500 pages of regulations, Jordan, just released within the hour. What’s the headline?

JORDAN RAU: I think that the main thing that CMS has decided to do is to offer as many carrots to bring doctors and hospitals to collaborate in these new models of health care without risking giving away the federal coffers, in terms of costing too much money.

ACOs Explained

So, they set up a system where providers can band together and get savings in a couple of different ways if they particulate in this program of up to significant amounts  up to, I think, 50 or 60 percent of the amount that the government saves.

JACKIE JUDD: If they meet certain quality thresholds.

JORDAN RAU: They have to meet a number of quality thresholds and cost thresholds as well. They have to not cost the government money, or else they can lose money. They have also tried to address a lot of the issues that the doctors, hospitals and other providers had ahead of time, such as making sure they wouldn’t be prosecuted for anti-trust violations if they all participated.

The government is basically going to give a pass to anyone that’s less than a third of the market, which will be a big deal for some of the smaller ACOs, but not for the ones that totally dominate  they will still be subject to some stringent anti-trust review.

JACKIE JUDD: There was a lot of discussion during the briefing with CMS officials and other government officials who were on the [phone] call about what exactly Medicare would get from this in terns of savings. What’s the bottom line?

JORDAN RAU: The CMS actuary estimated that over three years they’d get between a half billion and almost one billion dollars, which is a nice number to show, but it isn’t going to solve the Medicare cost problem. It is going to give them some good political cover to experiment over a period with this, and if it eventually grows, then maybe they could get more. But it’s not going to be a substantial savings for the program short-term.

JACKIE JUDD: It’s a tiny fraction of what’s now spent on Medicare.

JORDAN RAU: That’s right.

JACKIE JUDD: What is the timeline for this? There’s a 60-day period for public comment. What happens after that?

JORDAN RAU: After that, they will finalize the rule, presumably. This rule was delayed, I think, six months, but if they stick by that, they will have the final rule. And then different doctors, hospitals and providers will apply to become an ACO, and you’ll have to meet a number of certain thresholds, including having 5,000 Medicare patients. Then the department will review and okay some of them but not all. Starting probably in January – that’s what the health care law passed last year said when this would start  they would start being ACOs and being paid a little bit differently, as was intended in the law.

JACKIE JUDD: You mentioned earlier that federal officials spent a lot of time over the past few months listening to the concerns of hospitals, other providers, suppliers, etc. But what they came up with, what do you think will be easy targets? What will be the controversial sections of this?

JORDAN RAU: I think there’s going to be a lot of discussion among the providers about who becomes an ACO patient. And that’s a great concern for them all the way along, because they’re worried that if they get a set amount to care for someone and they get a lot of very, very sick patients and have to lay out a lot of expensive care, that may be [out of] their control. They’re also very worried about what happens, if under this system, what’s different from, say, managed care or an HMO, is that the patient can still go to any doctor outside of the ACO at any point they want.

And it’s going to take a long time for people to really decipher what they’ve done, but CMS has not given the providers all of the assurances they wanted – that they will be able to control and know exactly who are their patients and how they’re going to be attributed to them. So, that’s going to be a big issue for them.